Fed. Dist. Court in California Holds Sale of Property for Secular Use Does Not Constitute “Religious Exercise”

The Northern District of California recently dismissed RLUIPA claims filed by the California-Nevada Annual Conference of the Methodist Church (the “Conference”) against the City of San Francisco. The case revolves around the sale of a Methodist Church located at 1601 Larkin Street in the Russian Hill area of San Francisco. The church was constructed after the 1906 earthquake and was home to a thriving congregation in the 1930s and 1940s. By the 1970s, however, the congregation had declined significantly, and by 2000 there were only eight members. By 2003, the church was no longer used for religious purposes.

In 2004, the Conference arranged to sell the church to Pacific Polk Properties, LLC (“Polk”) for the development of market-rate condominiums. The purchase price was $3,000,000, but as a condition of the sale, the existing church had to be demolished. The Conference and Polk sought to obtain the necessary permits and approvals for demolition, but the San Francisco Planning Department determined that the proposed demolition required an environmental impact report (“EIR”) under the California Environmental Quality Act (“CEQA”). The City issued a draft EIR in April of 2007 and then held a public hearing on the application. At the hearing, it was suggested for the first time that the church should be designated as a “landmark.”

Almost three years after the demolition application was filed, it was referred to the San Francisco Historic Preservation Board. The Conference subsequently sued in state court and in May, 2008, received an order requiring the City to cease landmark proceedings. The City appealed the decision, but the Court of Appeals unanimously affirmed, finding the City lacked authority to landmark the church.

In 2010, the permitting process for approval of Polk’s proposed development and the necessary demolition permit recommenced. After approximately three more years (ten since the original application), several revisions to the Draft EIR, modified design proposals and numerous committee and public hearings, Polk’s building permit and the demolition permit applications were granted. The Conference’s original complaint was filed on May 5, 2011, but later amended to incorporate subsequent events, including the April, 2014 approvals.

The Conference claimed that the City’s ten year delay in issuing a demolition permit substantially burdened its religious exercise in violation of RLUIPA and the First Amendment. Although its property would no longer be used for religious exercise, it claimed that the City “prevented it from converting the property into liquid assets that could then be used to further its religious mission.” For example, the Conference sought to use the money to “expand evangelical outreach programs, make needed repairs to buildings to provide safe places of worship, create new programs to expand Methodism in San Francisco, feed the poor and provide shelter for the homeless.” The court disagreed:

RLUIPA’s statutory language, its legislative history, and relevant case law establish that commercial endeavors such as that here – the sale of property for the construction of market rate condominiums – even if undertaken by the Conference in order to fund its religious mission, do not constitute “religious exercise” protected by RLUIPA.

The court did not, however dismiss the Conference’s First Amendment claim, which, unlike its RLUIPA claim, was “based upon a broader notion of unequal treatment.” Viewing the Conference’s first amended complaint in the most favorable light, the court found that the Conference may prove that the City acted with an intentional pattern and practice of discrimination, through approximately a decade of bureaucratic proceedings, as opposed to the RLUIPA claim, which was limited to the denial of the demolition permit. Finally, the court dismissed the Conference’s “course of conduct” regulatory takings claim, but granted the Conference leave to amend its complaint to specify what, if any decision by the City established a regulatory taking.

The decision in California-Nevada Annual Conf. of the Methodist Church v. San Francisco, No. 11-cv-02338 (N.D. CA 2014) is available here.

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